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🎙️ Ayr Wellness, CEO, David Goubert
Despite $328.3M in Net Debt, Ayr Wellness continues to work with creditors to improve the company's outlook which includes leading market share in several key markets (FL, NV, NJ).
[note: apologies in advance for a few spots where my WiFi was unstable]
David Goubert has over 30 years of experience in supply chain, manufacturing, retail, marketing, and e-commerce. He became the CEO at Ayr Wellness after joining as President for three months in November 2022, as a part of a planned succession plan. He was interested in joining the company because of the opportunity to optimize and scale a growing industry that helps people
Why he thinks the opportunity at Ayr Wellness is such an exciting one–the company's strong foundation, strategic footprint, and cultivation quality. He also mentioned that the urgent matter of managing the GSD NJ and Sira Naturals situation is now behind them
Addressing shareholder dilution and is resolving additional debt maturing in the near-term
M&A is not a priority for the company in 2023. There are states that they can look at from a license applications
Ayr's priorities for the year, which includes focusing on cash preservation and growth. Plans for optimizing cash flow and building a loyal customer base while also developing strong brands and high-quality products
How to build customer loyalty by understanding customer behavior and improving the in-store and online experience. Focus on expanding in key states such as Florida, New Jersey, Ohio, Nevada, and Massachusetts
Potential for wholesale growth in Massachusetts and the need to improve retail marketing efforts
The company's decision to focus on four strong brands
October 12, 2022. Ayr Wellness Appoints David Goubert as President, who started on on November 1, 2022 and is based out of the Company’s Miami headquarters.
Key States: Priorities include Florida, New Jersey (3 stores out of 30 stores, Expansion in Eatontown to nearly triple POS stations, increase capacity from 22 to 160 people, added 75 parking spaces), Ohio, Nevada (still interesting as they have the #1 market share in the state with the power to still grow).
Nevada: Although I typically think of Planet 13 as having the dominant market share in Nevada given that they report their market share (goal is 8-10%, mentioned above 8% from latest earnings) and one of their two dispensaries is a 24,000 sq ft SuperStore. David believes that Ayr Wellness with their 6 stores (3 Las Vegas, 3 Reno) in the state actually puts them at the top, with >10% market share. Planet 13 has 2 dispensaries, 3 cultivation & production facilities, and a distribution license in the state [note: Planet 13 reported 639 employees as of March 31, 2023, the majority of them are in Nevada].
I guess I should have read the quote on this press release for the closing of Tahoe Hydroponics a bit closer for the same answer:
“I am thrilled that we have finalized our acquisition of Tahoe Hydro. Although the teams and operations have been integrated since February 2022, we are pleased to make the combination official. Finalizing this transaction underscores our commitment to building depth in our core markets such as Nevada, where we have leading market share along with a differentiated footprint.”
— David Goubert, President & CEO of Ayr
“With 22 million residents and 138 million annual tourist visits, we believe Florida will be a top legal cannabis market, reaching $6 billion in annual revenue,”
— Trulieve CEO Kim Rivers
David is happy to let Trulieve lead the charge here on Florida’s adult-use ballot measure for 2024 (Safe & Smart) as the company has spent $30M+ on the initiative while it didn’t seem like Ayr Wellness spent any nominal amount, if any.
Massachusetts: Boston, Needham (medical only), Somerville, Watertown.
Illinois: Ayr Wellness Closes Acquisition of Herbal Remedies Dispensaries (May 2022). Both of these stores are on the other side of the Missouri border. Total consideration was $30M ($8M cash, $12M seller notes, $10M stock). At the time, based on current projections, the Company estimates it was paying ~5x Herbal Remedies’ 2021 EBITDA. In January 2023, the company mutually terminated a decision to acquire Dispensary 33 (owns and operate two licensed retail dispensaries in Chicago). Ayr had originally agreed to pay $55M upfront ($12M cash, $3M sellers notes, $40M stock).
Arizona (exited): Couldn’t get to the market share they wanted so was okay to divest. In March 2023, Ayr Wellness closed the sale of Arizona Assets (Blue Camo), which comprises the Company’s Arizona assets, to AZ Goat AZ, LLC (“AZ Goat” or the “Buyer”), a group consisting primarily of the former owners of Blue Camo, who sold the business to AYR in Q1 2021. The sale includes two licensed entities operating three Oasis-branded dispensaries in the greater Phoenix area, a 10,000 sq. ft. cultivation and processing facility in Chandler, and an 80,000 sq. ft. cultivation facility in Phoenix, and AYR’s majority interest in Willcox OC, LLC, a joint venture developing an outdoor cultivation facility.
Financing and Capital Structure.
The Company deployed $7.2M of capital expenditures in Q1 and ended the quarter with a cash balance of $96.5M.
Subsequent to quarter end, the Company reached an agreement to amend the terms of contingent consideration under the membership interest purchase agreements of GSD NJ, LLC and Sira Naturals Inc. The amendment for GSD NJ, LLC settles the contingent consideration with total proceeds of $37.2M, consisting of $10M in cash, $14M in promissory notes, $3M in Equity Shares, and another $10.2M in cash payable at a future time based on circumstances related to negotiations with other debtholders.
The promissory notes are due December 2026 with monthly interest-only payments of 13.5% until May 2024 (with 1% monthly amortization thereafter). The number of Equity Shares was calculated based on a market price equal to US$0.79 which represents 3,797,468 Equity Shares.
The amendment for Sira Naturals Inc. represents a two (2) year deferral of $27.5M of proceeds from the original May 2024 payment date, with an annual interest rate of 6.0% and 10% annual amortization payments. In addition, the Company has executed amendments to promissory notes issued to the GSD NJ, LLC seller representative and certain of its affiliates to extend the maturity dates of notes with outstanding principal amount of $27.65M in the aggregate for two (2) years, conditioned upon, among other things, holders of at least 75% of the Senior Secured Notes agreeing to extend the maturity date of such notes by at least two (2) years.
Brands: The Company currently has 12 brands, one (Ayr) for retail and 11 other for products (Kynd, Origyn, Stix, Levia, Road Tripper, Entourage, Haze, Wicked, Secret Orchard, Cannapunch, LIT). David points out that this will get trimmed down to four over time as the Company (and Cannabis companies in general) typically do not have the marketing budget to spend on so many brands.
Cannabis Investing: Ayr Wellness CEO David Goubert Focused On Debt And Cash (4/20/23)